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I am black-African, young and female, and working in the public interest sector. This is what it means to me:

It means that some of us are first generation graduates; we work with the added pressure of making money in order to financially support our families.

It means that sometimes we do not earn enough to sustain ourselves and our families and so many young, black-African lawyers end up leaving the public interest sector for jobs that they do not necessarily love, but that will make sure that they fulfil their obligations each month.

It means that we work in a sector that is not transformed enough: we see black-African lawyers within our organisations but they are not occupying senior positions.

It means that there has to be policies put in place, such as briefing policies, in order to hold organisations “accountable” for who they brief, or their failure to brief black counsel.

It means forming institutions such as the Black Workers Forum to “police” organisations when it comes to transformation….. 33 years after Democracy.

It means that there is a belief that young black lawyers are incapable of competently handling complicated matters or matters seen as falling within specialised areas of law.

It means that other black-African lawyers are afraid of putting their jobs on the line by briefing other black-African counsel because black-African counsel are “inexperienced and can’t take on matters probono”.

And on the burden of being both black-African and female: it means that your male counterparts are taken more seriously than you and that some clients will be more comfortable with their matters being handled by your male colleague.

But let us not forget the beauty of being a black-African lawyer:

As public interest organisations, the majority of our clients are black-Africans. This means that the majority of the work that we do is for our own people and for the betterment of our own people.

We are multi-lingual; we are able to communicate with our clients in a language that is their own. We understand the cultures and traditions of our clients.

We are a point of reference for clients. I have lost count of how many times I have been at court – going about my duties as a Candidate Attorney – and have been approached by members of the public, querying how to find a particular section of the court or how to fill in a domestic violence form. Our black skin means that we will understand better.

As a black-African child, we are taught that every elder is your mother/father or grandparent. For me this has meant that at every workshop or community consultations, I run to the aid of elderly people, making sure that they can get around with ease. My work as a black lawyer comes with a personal touch.

Lawyering whilst black…means that we have challenges; but we do our work anyway and we can understand the plight of our clients in a way that connects us to them.

Sindisiwe Mfeka – 2017 Bertha Justice Fellow

The Annual Bertha Convening is supported by the Bertha Foundation. We would like to thank them for their support of the next generation of young human rights lawyers. Read more about the Bertha Foundation and Bertha Fellows here: http://berthafoundation.org/

This is the second in a series on debt and how it can effect you. The previous post dealt with SA’s junk status and can be read here.

In its broadest sense, the idea of a “debt” refers to an obligation to do something, whether by payment or by the delivery of goods and services, or not to do something. For the purposes of this series, we will focus only on the obligation to repay money.

South Africans are no strangers to borrowing money. In 2014, the World Bank Findex reported that a higher percentage of people in South African borrowed money than in any other country in the world.[i] “Borrowing” could mean borrowing from financial institutions, from friends and family, from stores (buying on credit) and from private informal lenders. These are all types of debt.

Whatever the case may be, if you have debt, or are thinking of borrowing money, there are some important things you need to consider:

Whether the debt will be secured or unsecured;

What your interest rate will be; and

How many repayments you will be required to make.

In this post we will discuss some of the common types of debt and what makes them different from one another.

Common types of debt

Secured versus unsecured debt

Secured debt is when the person you borrow money from has some sort of claim to your assets if you don’t pay them back.[ii] Home loans are a good example of secured debt. On the other hand, unsecured debt is debt without any collateral or security. A personal loan from a bank is unsecured. Because secured debt is less risky, lenders will usually offer better interest rates for secured debt compared to unsecured debt.

Home loans

For many people, buying a home or land is the largest financial investment they will make over the course of their lives. A home loan is a loan given by a financial institution for the purchase of a house. They will give you enough money to buy the house today, if you agree to pay off the loan with interest in small amounts over a number of years. As it is such a large amount of money, the financial institution will usually require that the loan be secured by a mortgage bond over the property. This means that your house is the collateral for the loan, and can be seized by the bank if you fail to pay your debt.

What is a mortgage bond?

A mortgage bond is a legal instrument which is registered against the title deed of immovable property. It gives the bond holder something called a “real right” over your property. This prevents the owner of the property from selling the property without the permission of the bond holder, and allows the bond holder to sell the property if the owner fails to pay their home loan repayments, as agreed.

A bond comes into being when you sign bond documents with the bank or the bank’s attorneys. On a practical level, it is a note on the Deeds Office records that someone else has a real right over your property.

Car finance

You can finance your car through a financial institution in one of two ways: an instalment sale agreement, or a lease sale agreement. In both cases, the bank will own the car until you pay off the loan. Once you have made all the payments on an instalment sale agreement, you become the owner of the car. In the case of a lease sale agreement, you get the option to buy the car once the agreement has run its course.

You should always be wary of the fact that cars lose value over time. So, if you buy a car and need to sell it in a year’s time because you can no longer afford the repayments, it is possible that you won’t make enough money from the sale to repay everything you owe.

Personal Loans

A personal loan isn’t secured against anything you own. Unsecured loans are riskier than secured loans because it is less certain that the lender will get their money back if you fail to pay the loan repayments. To cover the risk, the lender will usually require a higher interest rate. Where you might get a home loan at 2% “above prime”, you could get a personal loan at anything from 5% to 20% above prime. In real monetary terms, that means you are paying a lot more for the debt.

Although it is a riskier form of debt, this does not mean that the lender can’t get their money back. A lender will still be able to enforce the agreement through the courts and the mechanisms in the National Credit Act 34 of 2005.

Payments by monthly instalments

Think of all of those adverts you see which tell you that you have the choice of paying for a product today, or paying a number of smaller payments over a number of months (TVs, furniture and cell phone contracts). If you choose to pay off the item over a number of months, you will have a contractual obligation to make those payments and, if you default, the store that you bought the item from will be able to take legal action against you for breaching that contractual obligation. This could involve reclaiming the item, cancelling the contract, and/or claiming damages against you. You will usually end up spending much more for the product than you would have if you had saved up and bought it cash.

Private informal lenders

Borrowing from informal lenders is common in South Africa.[iii] Private informal lenders are unregulated and, as such, may charge much higher interest than formal lenders. If you are borrowing informally, make sure that you know what interest will be expected from you. Be careful of lenders that don’t agree to repayment terms and interest up front, as you could end up repaying many times what you borrowed.

Debt traps

A debt trap is the term used to describe a situation where a person has debt that is extremely difficult or impossible to repay. One of the ways in which you can fall into a debt trap is when you start borrowing from other institutions, or from informal lenders, to repay the debt you currently have. It becomes a downward spiral when the new debt is on worse terms (higher interest) than the old debt. The further into debt you get, the closer you get to being blacklisted, declared insolvent and having your assets sold to repay your creditors.

Good debt management

Debt can be a very useful tool for buying assets or financing your dreams, but it can also be a quick way to lose a lot of the things you have worked so hard for. Being aware of how debt works and how to manage it is crucial if you are going to rely on debt to help you to reach your goals.

When you take out debt, remember that interest is the cost of that debt. The higher your interest rate, the more you are spending to get debt. The lower your interest, the cheaper your debt – always aim to get the lowest interest rate you can. One of the ways that a financial institution will determine what your interest rate will be, is to consider your credit rating. When you default on your payments (make late payments or no payment at all), your credit rating goes down. This will make your future debt more expensive and possibly lead to your eventual blacklisting. When you pay your debts according to the terms of your agreement, your credit rating improves. The better your credit rating, the more likely you will be offered better interest rates in future – always try to stick to the terms of your contracts.

In our next part of this series, we will deal with the issue of interest rates and inflation and how this affects debt.

By: Alexander Ashton

Alexandra Ashton is an attorney heading up the LRC Johannesburg debt and housing department. She holds a BCom and an LLB with distinction from Wits University.

Alex, with thanks to the continued financial support of Legal Aid South Africa, is currently working on assisting people who lost their homes as a result of the fraudulent Brusson Finance lending scheme to be restored ownership of their properties.

Disclaimer: The opinions expressed by the Realising Rights bloggers and those providing comments are theirs alone, and do not reflect the opinions of the Legal Resources Centre. The Legal Resources Centre is not responsible for the accuracy of any of the information supplied by the bloggers.

[i] According to the World Bank, Global Findex Data Bank, (available at: Databank.worldbank.org/data/reports.aspx?source=1228) 85.6% of South Africans had borrowed money in the year leading up to the report compared to the global average of 42%. See also Demirguc-Kunt et al, “The Global Findex Database 2014: Measuring Financial Inclusion around the World” at page 7 available at: http://www.worldbank.org/en/programs/globalfindex.

[ii] A secured loan is defined in the National Credit Act No.34 of 2005 as “an agreement, irrespective of its form . . . in terms of which a person advances money or grants credit to another, and retains, or receives a pledge to any movable property or other thing of value as security for all amounts due under that agreement”.

[iii] The 2014 World Bank Findex Data Bank recorded that 10.9% of South Africans have borrowed from informal lenders.

As of today, 07 April 2017, both Standard and Poor’s (S&P) and Fitch, two of the three international ratings agencies alongside Moody’s, have downgraded South Africa’s credit rating to sub-investment grade, or “junk status”. There has been a lot of discussion about how this could affect the exchange rate, international investment, taxes and government spending. But how does it affect the average person and what, from a legal standpoint, should you be aware of?

Before we start, it is important to note that there is no need to panic. Economic changes don’t usually happen too drastically, or overnight. Nonetheless, there are things that you should do to prepare yourself so that you are not caught financially off-guard by changes as they happen.

So what can the average person expect? The average person could be affected in five ways: taxes may increase, interest rates may increase, inflation may increase, job security may decrease and returns on your pension, provident and retirement funds will probably decrease. What this boils down to is more pressure on your pocket. That pressure will make it harder to save, invest, and – more critically – make it harder to repay debt and cover your day-to-day expenses. In this post we are going to focus on what happens when you can’t pay back your debt.

First of all, what is debt? Debt is when you have effectively borrowed someone else’s money that you need to pay back. Debt can take a number of forms. Home loans, vehicle finance, credit card debt, personal loans, store cards, cell phone contracts, and instalment sales are all forms of debt. With the pressure of interest rate increases and rising costs of expenses, it becomes harder to make your monthly repayments. If you don’t or can’t pay your monthly instalments, your credit provider can take a number of legal steps against you depending on you contract with them and the nature of the debt.

Ultimately, the law recognises a creditor’s right to be paid for what they have lent you. So if you stop paying, you don’t simply get to walk away without repercussions The law provides a number of ways for creditors to get their money back. Ultimately, each way puts your belongings and, sometimes, your livelihood and home at risk. Common legal routes to recoup unpaid debt are as follows:

Bonds over your immovable property (mortgage bonds) allow credit providers to sell off that immovable property to repay themselves. You might have a home loan secured by a mortgage bond over your house for instance. If you default, the bond would allow the bank to sell your home.

Orders of insolvency allow creditors to sell off your assets to repay themselves.

Over and above all of this, defaulting means that you run the risk of being black listed. If you are black listed you won’t be able to get credit in future. If you avoid black listing, you may run the risk of having your own personal credit rating downgraded. Just like the S&P downgrade, this will make credit institutions less inclined to lend you money, and if they are willing to lend you money, it will more than likely be at interest higher rates.

So basically, you need to avoid defaulting on your debt.

What you as a consumer and a debt holder can do to avoid default is to first and foremost “know your debt”. In other words, know exactly how much you have borrowed, and exactly how much you have to pay back on a monthly basis.

Secondly, “know your interest rates”. You need to know which of your interest rates are flexible and take steps to understand what an increase in the repo rate will mean for each of your repayments. Most debt is granted on a flexible interest rate. What this means is that if the reserve bank chooses to increase the repo or “prime” lending rate (which is likely to happen following a downgrade) your interest rate will also be increased.

Thirdly, “have a plan to reduce your debt”. Have a plan of how you are going to repay your debt. The best place to start to reduce debt is try to reduce your expenses and to use any extra money you have – after paying off your monthly repayments – to pay off your debt starting with the debt with highest interest rate.

Fourth, “try to avoid more debt”. Particularly avoid debt on medium-sized purchases and purchases you don’t need. That new TV may only cost you “R199 per month!!!” But that is adding to your debt burden, your risk of default, and usually, you will end up paying more for that TV over the long run than you will if you save up and buy it in a lump sum. Yes, this means you may not have as many nice things. But if interest rates increase you will be grateful that you are not drowning in debt.

Fifth, “downsize if necessary”. Do you really need that expensive car, that expensive house, or that fancy cellphone? Think about going simpler, smaller and cheaper. When it comes to debt, every little bit counts.

I hope this basic overview has been helpful. Over the weeks to come, we are going to run a number of articles on our “Realising Rights blog” to unpack the concepts set out in this article with the aim of helping you take control of your debt.

By Alexandra Ashton

Alexandra Ashton is an attorney heading up the LRC Johannesburg’s debt and housing department. She holds a BCom and an LLB with distinction from Wits.

Alex, with thanks to the continued financial support of Legal Aid South Africa, is currently working on assisting people who lost their homes as a result of the fraudulent Brusson Finance lending scheme to be restored with ownership of their properties.

Disclaimer: The opinions expressed by the Realising Rights bloggers and those providing comments are theirs alone, and do not reflect the opinions of the Legal Resources Centre. The Legal Resources Centre is not responsible for the accuracy of any of the information supplied by the bloggers.

The threat of fracking has been imminent in South Africa for almost a decade. But South Africa is just not ready for fracking. There are many detrimental effects of this mining activity on communities and the environment. The regulatory requirements to mediate these effects are also not present. Allowing fracking to take place in South Africa would simply be disastrous.

Fracking, or hydraulic fracturing, is a technique used to extract gas from deep underground, which involves digging wells up to four kilometres deep. A mixture of water, sand and chemicals is injected at high pressure to crack shale rock formations and release the gas, which is then brought to the surface.

History of Fracking in South Africa

Fracking is not a new practice and dates back to the 1860s in the United States but started being used commercially in 2009. Currently, almost 95 percent of US states use fracking techniques. In South Africa, formal interest in fracking began in 2008; the potential areas of interest being in the Karoo and parts of KwaZulu-Natal (KZN). Since then, there have been a number of applications for exploration rights from companies such as Bundu Oil and Gas, Shell SA and Falcon Gas and Oil.

The threat of litigation around the imperfections of this process, and around the absolute lack of investigation into the technology and its impacts, resulted in the Minister of Mineral Resources, Susan Shabangu, declaring a moratorium on the issue of exploration licences in April 2011. The Department of Minerals and Resources (DMR) was instructed to set up a task team to explore the implications of fracking, the feasibility of the gas extraction, as well as its impact on the environment.

At that time, no timeline was given for when research would be conducted. The Minister commissioned a report from a group of different government agencies to inform her about whether fracking should go ahead or not. The problem with the task team responsible for the report was that it excluded representatives from key government departments. Only certain voices were heard in the report. This omission does not reflect administrative justice, a right to which we are entitled under the Constitution.

In September 2012, a little over a year later, the moratorium was lifted. Cabinet endorsed recommendations of the report on the lifting of the moratorium and mandated the Minister of the DMR to hold a series of public consultations with interested and affected stakeholders to provide further details.

Possible pollution events associated with fracking

Fracking typically requires 1000-2000 large truckloads of water, which means thousands of wells will require truckloads of water to be transported to the fracking site at significant environmental cost. Most of South Africa’s surface fresh water (98%) has already been allocated to existing users. This raises the question of how the fracking industry will source the millions of litres of water it will need to undertake its operations.

Fracking entails the pumping of toxic chemicals at high pressure, with water and sand, into underground shale rock formations. Some of the fracking liquid returns to the surface after use, and has to be disposed of without causing harm to the environment. The fracking liquid often consists of both toxic and radioactive sludge, which must be transported to hazardous waste management sites.

The most serious environmental concern related to fracking is that of ground water contamination. The potential risk to ground water comes from two sources: the injected water (water and chemicals) and the released natural gas. The water used in drilling shale gas is fused with sand and chemicals (corrosive inhibitors, surfactants, iron control chemicals, biocides, friction reducers and scale inhibitors). When these are injected down the well, there is a strong possibility of polluting underground water. Freshwater reserves can also be contaminated when the fluid is spilt at the site of the wells or in other accidental spills.

Fracking can release gas and / or vapour into the atmosphere. These emissions are either of original additive chemicals, entrained contaminants from the shale formation or the methane released by the fracking process. There is an ongoing debate about the relative leakage of methane into the atmosphere from the exploitation of shale gas in comparison to the emission rate from conventional gas. This is potentially important because a high leakage rate might mean that methane released into the atmosphere from shale gas extraction could have a higher net greenhouse gas footprint, than, for example, coal. Fracking operations should, therefore, seek to minimize all emissions into the atmosphere and monitoring processes need to be actively enforced.

Lastly, shale gas development involves continuous activity conducted over a sustained period of time (this can vary considerably, but is often several years) over the entire course of a day, seven days a week. The noise of compressors, generators and drilling, extensive truck movements, intrusive un-natural lighting overnight and the release of bad smelling chemicals can have significant negative health and well-being impacts on nearby communities, especially in the context of quiet rural and semi-rural areas that also relatively densely populated.

Do we have the regulatory requirements to undertake fracking?

What are the regulatory conditions that currently exist that would affect fracking? The Mineral and Petroleum Resources Development Act (MPRDA) is the central statute that governs applications for and the granting of rights and permits to conduct shale gas extraction. The requirement for the submission and approval of an Environmental Management Plan (EMP) for an exploration and production right allows for the potential environmental impacts of shale gas extraction to be investigated prior to such activities being conducted.

If waste will be generated by any activity, an assessment as to whether the National Environmental Management Water Act (NEMWA) applies to the activity will need to be made and, if required, any requisite waste management licenses applied for and obtained prior to starting any activity requiring the management of the waste.

Should any company succeed with exploration, a water use license in terms of the National Water Act is to be secured through applications for individual or integrated water use licenses. Various factors will have to be considered for the granting of the licence – one of which is the availability of resources.

How effective are these measures to mitigate the impacts of fracking?

Should the South African government decide to issue exploration and production rights for shale gas fracking, the least we can expect is an appropriate regulatory regime that is implemented, monitored and enforced. The current fracking regulations and the current pollution control laws do not achieve this.

We do not have the capacity or will at local – and national government level to do the basics of waste management, such as collecting solid waste, preventing dumping, closing down illegal mining operations and controlling sewage and industrial pollution. We simply will not be able to handle the extra burden of fracking waste once fracking activities begin.

Fracking can be extremely water-intensive, depending on the precise techniques used. This may pose risks in the KZN Midlands, and other parts of the country which are currently experiencing drought conditions.

In theory, it seems that South Africa’s pollution control laws do allow for mining; however, due to the nature of fracking, the current pollution control laws may not be sufficient to deal with the detrimental and long-term effects of fracking.

The environmental impacts of conventional mining in South Africa have never been regulated effectively. To the extent that appropriate regulations do exist, their implementation has been ineffective. As a result, mining has had, and continues to have, significant negative impacts on the environment. Many of these impacts, such as acid mine drainage, cannot be easily remedied and will continue to impose heavy financial, health and environmental costs on society for the foreseeable future.

I would argue then, that with the current regulatory environment, as well as the potential harm caused by fracking, the government will need to rethink its regulatory regime before allowing fracking to happen.

by: Shaun Bergover, candidate attorney

Disclaimer: The opinions expressed by the Realising Rights bloggers and those providing comments are theirs alone, and do not reflect the opinions of the Legal Resources Centre. The Legal Resources Centre is not responsible for the accuracy of any of the information supplied by the bloggers.